Discovering Your “X-Factor”

Posted by Chuck Kocher
On October 22, 2013

In the entertainment industry, people talk about “The X-Factor.” Some in the industry refer to it as the “It-factor.” TV-mogul, Simon Cowell built a whole reality TV series around the search for people who have “The X-Factor.”

In entertainment, it’s a kind of undefined and mysterious “something” that an actor/singer/dancer has that sets him or her apart from everyone else. It’s hard (or impossible) to put a finger on it exactly, but whatever it is—it sets certain people apart.

When it comes to business, we can’t afford the luxury of vague or undefined differentiators. We need to know exactly what it is that sets us apart from our competition. And we need to hone and develop that “X-factor” if we want to succeed.

Here’s the thing: Your company’s X-Factor doesn’t have to be complicated or outrageously innovative. But it does need to be something that you do better than anyone else. Here’s an example (gleaned from a Vern Harnish article in Fortune Small Business).

A Coffee Coup: Not that long ago, people would have balked at paying more than $2 for a cup of coffee. But Howard Schulz, founder of Starbucks, had a different idea. He offered customers an extensive selection of unusual roasts in sophisticated, European-style coffee bars and soon had long lines of connoisseurs (or those who fancied themselves as such) who embraced the idea of indulging themselves for just a few dollars. Schultz didn’t just sell coffee—he sold an experience. And as such, he was able to charge several times what “regular” coffee shops were charging.

His higher prices also enabled him to do something else. He knew he needed to ensure quality control. His extra profits freed him from having to franchise his shops—and helped him control quality. There’s nothing particularly revolutionary about selling coffee. But nobody (to that point) had ever done it quite like Schultz did. That was his “X-Factor.”

Taking It Out Back: One of the toughest things about the restaurant business is management turnover. Many chains spend millions of dollars every year to recruit and train new managers. It’s a huge recurring expense. When industry veterans Chris Sullivan and Robert Basham formed the Aussie-themed Outback Steakhouse, they hit that issue head on. They realized that if they could retain managers for more than the industry-standard six months, it would give them a competitive edge. So they initiated a breakthrough compensation planthat required key managers to sign five-year contracts under which they would invest $25,000 in the restaurant they were going to manage in exchange for 10% of the store’s cash flow and a base salary.

The deal had the potential to turn $45,000-a-year employees into millionaires, and ultimately it worked. Today about 95% of managers stay with Outback for at least five years—giving the company a 10X advantage over its rivals. Outback’s “X-Factor” is not really in their food or in their Aussie-accented appeal. It’s a not-terribly-sexy approach to management. And it works.

What’s your “X-Factor?” What do you do (or what can you do) that nobody else is doing? What will give you that little edge that makes all the difference and set you apart? It doesn’t have to be complicated, or sexy. It just has to be all yours!